ECONOMIC SURVEY

Hawera Star, Volume L, 13 May 1931, Page 8

ECONOMIC SURVEY

I'RESENTED BEFORE COURT WAGE REDUCTION APPLICATION DP OP IN VALUE OF PRODUCE. POINTS FROM ADDRESS OF AIR. T. 0. BISHOP. “One of the things about the economic position of New Zealand which strikes an investigator most forcibly is the great measure of her dependence upon other. countries. lo quote the Unemployment Investigation Commit» tee ’s report: — “New Zealand 'is a small country with a comparatively high standard of living. We produce a very large surplus of certain goods and we are. remarkably deficient in the production of other goods —for example, base metals and the heavier manufactures. Consequently our external trade is, per capita, the highest in the world and-we are proportionately’ 'less independent of other countries* than- almost any other people . ... We depend upon the requirements of other-countries toi kb- ' ‘ sorb oiir surplus production and upon their production to supply many of our requirements.

“That is a simple statement of fact. It might have been added that we have also been greatly dependent upon other countries for capital for development of our resources, that we have borrowed heavily and have to meet the interest payments out of our general resources because very little of the expenditure of borrowed money lias led to the earning of interest or sinking fund. It follows that our economic position as a debtor nation is unsound if the total value of our exports does not exceed the sum of the value of our imports plus payments of interest, in any year or over a period of years.” Mr Bishop quoted official figures to show that financially the Dominion “has been losing ground steadily for the ten years 1920-29 inclusive and that the accumulated debit balance for that period is no less than 02 million pounds .... In the elceen years the Dominion lias borrowed abroad an additional £00.000,000: indebtedness at March 31, 1930. was in excess of £267,000,000 or £I7S Is Id per head, nearly £7O per head greater than the debt of New South Wales, double that of Victoria and in excess of the total for all Australia, including the debit of the Commonwealth. NATIONAL INDEBTEDNESS.

“If the local body debt be added to the debt of the general Government Ino total after making proper allowance is £327,563,856 or £223 per head of population. The total amount of interest payable on the national debt as at March 31, 1930, was £11,991,370, of which £5,228,155 is payable in New Zealand, £0,470,369 in London and £292.516 in Australia. The interest, on local body debts amounts to four and a half millions annually, of which £l,319,294 is payable outside New Zealand. It is necessary therefore that the value of our exports should exceed that of our imports each year by about eight million pounds per annum, plus the cost of shipping and other incidental charges. If this balance is not secured the only way to square accounts is by way of borrowing and that method lias been practised in New Zealand until the danger point Juts been reached. There are two points lo be specially noted arising out of these figures: Fi.rst, the magnitude of the fixed charges to be paid out of our national revenue; second, that we shall have to live within our income for some time to come because as a nation we cannot afford to borrow auy more money even if it, were available.

REDUCED NATIONAL INCOME, i “it- is not necessary to my case l to discuss the actual amount of the national income. The outstanding fact that is essential is that the. total has been very substantially reduced in the last two years. As compared with two years ago our income from the sale of exportable products has fallen by just on eighteen million pounds and the fall has. been greatest in the last few months. If the rate of progression is continued, as appears more than likely, the reduction for the year ended June next as compared with the year ended June last will be approximately £13,000,000 and the reduction for two years will total over twenty million pounds. “We. are back to pre-war prices. In 1913 the total value of our exports was just under £23,.500,000. Add fiftyseven per cent, for increased volume of 'production at the same prices and our export values for this current year are indicated as approximately £30,000,000 or £20,000,000 less than 1929. “The hard unpleasant fact which cannot be avoided is that for this current year the totail value of our exports will be more than twenty million pounds less than it was for the year 1929. But a. reduction of twentymillion pounds in our income from exports must bring about reductions in other directions also. One third of our primary -production is consumed locally and the price depends on"the prices received for the two-thirds exported. Considering the total primary production the fall in value for the current year as compared with 1929 is therefore approximately £30,000,000. The production'figures for secondary industries are- not available yet, but it is certain that there is a falling off in production of manufactures as a result of the reduced purchasing power of exports. Tile total reduction of our spending power is therefore twenty million pounds on account of exports 'plus six millions ’less loan money plus an unknown sum for reduced production.”

EAR MENS’ PURCHASING- POWER. After examining in detail the effect of the priec reduction, Mr. Bishop went on to say: “The purchasing power of the farmers is less than 60 per cent, of what it was in 1914 as regards either farm requirements or general commodities. It has been below the 1914 level over since 1925. Two important facts are established by these figures. First the value of our primary production for the current year has fallen front the level of 1929 by not less than £30,000.000 or 34 pyr cent. Second, there lias developed a great- disparity between oinexpert prices and our internal prices.

EFFECT OF PRICE DISPARITY. “A very large proportion of the total production of New Zealand comes direetlv from the land. The production figures for the 1928-29 year, page 926, Year Book 1931, show that £84,000.000 out of a total of £126,009,000 was from this source. Of the total primary production for that year £56,000,000 worth or 06.6 per cent, was exported. It follows that the prices of our primary products depend entirely upon overseas markets. The remainer of our products are marketed within New Zealand. In come cases the market is entirely sheltered. in other eases partially sholtw-

ed. The foundation of the whole structure of the trade and commerce of New Zealand is production from the land for export. The prosperity of all other industries depends upon the prosperity of the industries generally grouped together under the term ‘‘farming. ’ 11 the foundation remains linn the superstructure is sale, but if anything happens to the foundation the .superstructure is endangered. Every period of low prices which the Dominion lias experienced has given proof of this.- Ihe farming industries are first affected, tin, reduction of the farmers’- jpurcliasi„«- power reacts upon aill internal industries and depression becomes general Both the foundation and the superstructure of our mcaistrial and commercial edifice are showing alarmin- weaknesses at present. Expo table ■ uocluots are bringing prices actuals less than the cost of production on the average farm, which means that the foundation of our structure far irom hciurr capable of carrying the ueight put upon it is barely self-supporting.

REMEDIAL MEASURES. ■‘Much has been none and is being done to' strengthen the foundation bj tion. The increase of o< pei ccmt ni volume of exports from 1913 to LLJ has already beeu referred to. ine rate of increse must necessarily slacken off under even the most favourable) conditions, and the ratio °i eost t increased production mil natuiau increase as production approaches mu ease as i , th apart from ZV, Zto.'/Tc " f «£ preS*low prices H JWga to reduce prodiiction 1» prese nt “snsSois tod e- mot pay and will go out of production unless costs can bo. reduced suffi+n leave a margin ol piont. “Something has been u-.irds lightening the superstructure mid tlic Government lias example as regards the 1-"»lm Se ' V '“There remains the necessity to adjust the labour costs of piuductioir and distribution by a reduction of ua rates. There lias .already been n fluction of wages m the aggiegavt, the numbers of registered nn em P?oyed afford abundant proof of that if th nroof were needed other than that afKed by the fall in national 'income. \ reduction in the sum total of howevei has no effect in reducing costs in fact, it tends to increase costs rather than otherwise Tb <r tactorv bv reason of reduced demand ioi iE‘product Ims to iwtaoo «•*<* shorton hands tlm effect must bo to carried is of necessity higliei. But n +1)0 factory bv 'a reduction of the imgo ,'ate’ is W to r.bp.niv and 1 transport cdiaiges, Sits' ehatges and totateto pin roes are all capable ot sirniiai ie ductioii the output may Be mkintamm , the full staff employed and the p duet made available to as uHe circle of consumers as »rtme. mcan m ffi te'ZT bVccn producer tho t totni 1 cost 1 of 'rail wavs or carting, but I. submit that not less than SO ner cent of . the c °st rir’up'S offppt of writes. Between the aiul the consumer woollen goods aie affected by wages at every «ta»e. Musterers, shearers, shed Bands, cart: ers draw wages m the fust sta w e. sorters, classers and storemen an carters in the second stage, + acton employees in the third stage: carters transport workers, warehousemen and travellers in the fourth stage and ictail shop assistants m the final \t evorv stage wages add to the tost of every article grown, manufactured or imported into New Zealand for our

“The cumulative effect of a general wage reduction put into operation by every industry and passed on to the consumer m all cases cannot fail to have that effect upon costs and prices which is so essential under present conditions. c FIXED WAGE RAIES.

“Tliere is still another point to be made and upon which too much emphasis can hardly be placed, v iz. : Wage rates under awards and industrial agreements are an immovable. factor in the creation of total costs. The added value to-dav is down to an unknown. level. In many industries production has almost ceased and in '-an cases the value of products lias fallen subsicn. nt,tally. -Wage, .rates-, however remain fixed and until they are adjusted there, can be no reduction in wage costs at any stage, of the complicated processes of production and distribution. “iff the economic equilibrium be restored by adjusting the costs of commodities' to meet the reduced purchasing .power of primary products the volume of our exports will decrease rapidly and inevitably, with this result, that our exports will he insufficient to pay for our imports, visible and invisible, and the 'exchange rate will be raised against us as lias happ<*ned in Australia' where at present the rate of exchange with England is quoted at 30 per cent- Therefore the Austialinn, worker .pay*: 30 per- cent, more for a large, exportable surplus. Obviously all goods produced in Australia having the price of all imported goods is 30 per cent, higher because of the exchange and sto- the Australian worker pavs = 30 per cent, on goods of the second class also. For goods of the third class the position is arguable, but at least, it is certain that the exchange rate, is equivalent to si- .substantial increase in tariff and prices are kept up to some extent by that increase. The purchasing power of the Australian pound, in Australia, as well as in London. is therefore reduced to 14s.’’

DROP IN PRIMARY VALUES All- Bishop concluded iiis. -statement with figures showing the drop in the value of New Zealand’s primary products. These showed that wool had dropped from £.11,874,493 in 1928-29 to £3.482,944 in 193031 ; the per bale average prices were 921 8s Kkl ami £7 19s 7-d.

Thus, in the three seasons, though production had increased in volume, the total value of butter and cheese ex-' port s bad been, as follows : 4928-29, £19,745,372; 1929-30. £47,121,256; 1930-31, £14,114,000. As reported in yesterday’s issue, Mr B'lsliou concluded his address with the assertion, that a 20 per cent, .wage reel notion was necessary in the Dominion.

Season. CHEESE. Tons. Total value. 192S-29 ... 30,00-3 1-6,789,832 1929-30 ... 87.233 06,024,21 5 19:50-31 ... 90.000 14,158,000 1928-29 ... BUTTER. 51.656 012,955.510 1929-30 ... 95,34-1-111,098,041 1930-31 ... 95,000 £9,956,000